Nearly 76,000 homeowners in Louisiana and Mississippi have been unable to resume their mortgage payments since last year's Gulf Coast hurricanes and have fallen into “seriously delinquent” status, meaning that their payments are overdue by 90 days or more or they have entered foreclosure, according to the results of the fourth quarter National Delinquency Survey conducted by the Mortgage Bankers Association (MBA).
The increase in Gulf Coast serious delinquencies—up from 22,980 at the end of the third quarter—led to a higher serious delinquency rate for the nation as a whole, which stood at 2.08 percent as of Dec. 31. That figure is 26 basis points higher than at the end of the third quarter, and 1 basis point higher than the fourth quarter of 2004. The national delinquency rate—loans are considered delinquent when they are 30 days or more past due—rose to 4.70 percent, up from 4.44 percent in the third quarter and 4.38 percent a year earlier.
The MBA attributed much of those increases to property losses sustained from Hurricane Katrina. Without that catastrophe, both the overall delinquency rate and the seriously delinquent rate would have climbed less, to 4.55 percent and 1.95 percent, respectively. The association did find, though, that Katrina's effects actually led to a slight reduction in the percentage of loans that entered foreclosure during the fourth quarter, likely as a result of the programs that lenders offered to Gulf Coast homeowners to protect them against foreclosure.
Douglas Duncan, the MBA's chief economist and senior vice president, says that other factors also contributed to the rise in delinquencies, including higher energy prices and interest rates, the aging of the loan portfolio, and the increased share of adjustable rate mortgages. ARMs always have higher delinquency rates than fixed rate mortgages, and the probability of late payments peaks when a mortgage is between three and five years old. “About half the loans out there are three years or less old,” he notes.
Other researchers are also keeping a close eye on delinquency and default rates among ARM borrowers. In a recent report, First American Real Estate Solutions concluded that defaults due to mortgage payment reset—when ARMs adjust to new rates—will not significantly affect the economy, but author Christopher Cagan warned that the 1.3 million homeowners who took out mortgages with introductory “teaser” rates in 2004 and 2005 are at the most risk of payment shock and subsequent default.
MEETS EXPECTATIONS: In February, total housing starts fell closer to a pace for the year predicted by many economists, down almost 5% year over year. Multifamily starts fell more sharply than single-family units.
SLOW GROWTH: Fixed rates continued their slow-but-steady climb back to their late summer 2003 levels, when the fixed rate mortgage hit 6.44%. ARM rates inched higher in March.
TOO EXPENSIVE: More consumers said it's a bad time to buy a house due to high real estate prices. Just 58% said this is a good time to buy, down from 74% a year ago.
SAME STORY: The Midwest's woes continued in February, as starts there fell yet again compared with the previous month and the previous year.
PRICING POWER: The median price of new homes jumped in January, up 6.7% compared with a year earlier. Price appreciation of existing homes slowed during the winter.
TRUTH IN NUMBERS: January's new-home sales data seem to show the trend being reported of growing amounts of inventory: They're down 3.2% against January 2004.
FEBRUARY FALL: Builders pulled permits at a slower rate in February than they had in January, but better than a year earlier. Multi-family permits were especially strong.
COOL DOWN: The NAHB attributed a slight drop in builder confidence to eroding affordability and the withdrawal of investor demand in some markets.
SETTLED DOWN: Prices for both framing lumber and structural panels remain below their year-ago levels. OSB prices are down 25% since March 2005.